Price inelasticity is worth noting. A small amount of supply destruction will make prices spike significantly. That's why NYC's legacy rent control system is such an issue. It only affects about 1-2% of apartments, but that probably pushes rents up 50% or more.

So, yes, the fact that global-elite billionaire scumbags use our real estate to launder their drug/blood money is a huge issue.

For lower end housing stock, homeowners usually "jump" up to more expensive properties as they become more financially stable or as they need the room.

That seems to be a Boomer thing. They bought the 3000 SF houses that are impossible to maintain unless you hire maids (which Americans don't like to do, even though at $20/h they're still cheaper than doing your own cleaning). I think the young generation values freedom and experiences (e.g. travel) more than stuff and space. Frankly, I find McMansions depressing.

Unfortunately, in many cities it's impossible to get a 1000 SF place at an appropriate price. You end up buying or renting 2000+ because that's all there is, unless you're talking about seriously defective housing (e.g. no laundry in the building, no dishwasher.)